What if this is the bottom?
If this is the case, then what happens when you reach the lowest point? Does everything end here, or is there something beyond? It's worth considering what lies beneath and whether there's more to discover below this level.

Written by: Jeff Park

Translated by: Block unicorn

Introduction

A few days ago, rumors that Kevin Woorch might be nominated as Federal Reserve Chair caused Bitcoin prices to plummet rapidly to $82,000, then briefly dip near $74,500. This volatile price movement made me realize that even among the most seasoned traders in the global macroeconomic field, there remains a persistent unease—an alertness to the contradictory personality of a “hawkish Fed Chair who wants to cut rates.” Because this contradiction itself embodies the duality inherent in currency devaluation.

The theory behind currency devaluation trading sounds simple: print money, devalue currency, and hard assets appreciate. But this “cheap money” narrative masks a more fundamental question, which determines Bitcoin’s success or failure: how will interest rates change?

Most Bitcoin advocates conflate monetary expansion with the appreciation of hard assets, believing that funds will automatically flow into scarce stores of value. This view overlooks a key mechanism: if you do not understand the yield curve’s movement, cheap money does not necessarily mean funds will flow into hard currencies. When interest rates fall, assets sensitive to duration—especially those with cash flows—become more attractive, creating strong competition for Bitcoin in terms of attention and capital. This indicates that the path from currency devaluation to Bitcoin dominance is not linear but depends on whether the current financial system can sustain itself or will collapse entirely.

In other words, Bitcoin is a risk premium duration (Risk Premium Duration) devaluation bet.

This is the distinction I previously discussed between “Negative Rho Bitcoin” and “Positive Rho Bitcoin,” representing two fundamentally different arguments that require opposite market conditions to materialize.

Understanding Rho: Interest Rate Sensitivity

In options terminology, Rho measures sensitivity to interest rate changes. Applied to Bitcoin, it reveals two very different paths:

“Negative Rho Bitcoin” performs better when interest rates decline. This reflects the continuity theory, albeit in a more extreme form: as long as the current financial system persists, with central banks maintaining credibility, lower interest rates (possibly even negative) make risk assets like Bitcoin more attractive relative to (potentially negative) opportunity costs, becoming the fastest investment choice. Think back to 2020-2021: Federal Reserve rates dropped to zero, real interest rates plunged into negative territory, Bitcoin surged, becoming the most attractive alternative to holding cash.

Conversely, “Positive Rho Bitcoin” performs better when interest rates rise or when volatility around the risk-free rate itself surges. This is the “break” theory, where the foundational assumptions of the financial system are shattered, and the concept of a risk-free rate is challenged. All traditional assets must be re-priced for their cash flows. For assets like Bitcoin that do not generate cash flows, this re-pricing has minimal impact, while longer-duration assets suffer catastrophic losses.

Currently, Bitcoin’s price is trapped, directionless, with no clear breakout volatility, perhaps indicating that investors cannot determine which theory is more relevant. For most Bitcoin maximalists, this is unsettling because concepts of inflation, and the closely related deflation and interest rate relationships, are often severely misunderstood.

Two Types of Deflation

To determine which Bitcoin theory holds sway, we need to distinguish between two types of deflation:

Good Deflation occurs when productivity improvements lead to falling prices. AI-driven automation, supply chain optimization, and manufacturing process improvements can lower costs while increasing output. This form of deflation (sometimes called supply-side deflation) is compatible with positive real interest rates and stable financial markets. It favors growth assets over hard currencies.

Bad Deflation occurs when credit tightening causes prices to fall. This form of deflation is catastrophic: debt defaults, bank failures, chain reactions of liquidation. Demand-driven deflation destroys the government bond market because it requires negative nominal interest rates to prevent total collapse. Stanley Druckenmiller once said, “The way to create deflation is to create an asset bubble,” explaining how bad deflation destroys duration assets and makes hard currencies essential.

We are currently experiencing benign deflation in the tech sector, avoiding the catastrophic deflation in credit markets. This environment is the worst for Bitcoin: it is enough to sustain growth assets’ appeal and maintain government bond credibility but not enough to trigger systemic collapse. This creates the perfect breeding ground for extreme distrust in Bitcoin.

When Cheap Money Does Not Flow into Hard Currencies

Currency devaluation (money supply exceeding productive output) is happening. As previously noted, precious metals prices rise due to a weakening dollar, reflecting this trend. Silver and gold prices soar to record highs, confirming the dollar’s declining purchasing power for tangible goods.

However, Bitcoin has not followed precious metals upward because, faced with structural resistance, Bitcoin—when interest rates are moderate or low rather than catastrophically collapsing—must compete with other long-duration assets for capital. These competitors are enormous in scale.

The Three Major Competitors for Bitcoin

In a low-to-moderate interest rate environment, Bitcoin faces competition from three asset classes that absorb funds that might otherwise flow into hard currencies:

1. AI and Capital-Intensive Growth (Total Market Cap over $10 trillion)

AI infrastructure development is the most capital-intensive growth opportunity since electrification. Nvidia alone has a market cap exceeding $2 trillion. The broader AI value chain—including semiconductors, data centers, edge computing, and power infrastructure—has a combined market cap approaching $10 trillion, with the software segment possibly even larger.

This is benign deflation: prices fall due to productivity gains, not credit contraction. AI promises exponential output growth while marginal costs decline. Since capital can fund these productivity miracles that generate real cash flows, why invest in zero-yield Bitcoin? Even more regrettably, AI industry demand for unlimited capital is strongest, and this rapidly evolving, large-scale arms race is closely tied to national security.

In a low-interest environment, such growth assets—especially with government subsidies—may attract significant capital inflows because their future cash flows can be discounted at favorable rates. Bitcoin, lacking cash flows to discount, relies solely on scarcity. When other options fund infrastructure for general AI (AGI), Bitcoin struggles to attract investors.

2. Real Estate (Over $45 trillion in the US alone)

The US residential real estate market exceeds $45 trillion; the global market approaches $350 trillion. When interest rates fall, mortgage costs decrease, making housing more affordable and pushing prices upward. Additionally, housing provides rental income and enjoys significant tax advantages.

This falls into the realm of bad deflation: if falling house prices are due to credit tightening rather than productivity declines, it signals systemic crisis. But in a low-interest environment, housing remains the primary store of wealth for the middle class. It is tangible, leveragable, and socially connected—traits Bitcoin lacks.

3. US Treasury Market ($27 trillion)

The US Treasury market remains the largest and most liquid capital pool globally. Unpaid debt totals $27 trillion (and continues to grow), backed by the Fed and denominated in the global reserve currency. When interest rates decline, durations lengthen, and Treasury yields can become quite attractive.

The key point: true deflation would cause the Treasury market to collapse. Negative nominal interest rates would become inevitable, and the concept of a risk-free benchmark would vanish. But we are far from that scenario. As long as Treasuries offer positive nominal yields and the Fed’s credibility remains intact, they can absorb large institutional capital—pension funds, insurance companies, foreign central banks—that Bitcoin can never reach.

Zero-Sum Reality

These three markets (AI growth, real estate, and Treasuries) together total over $100 trillion. For Bitcoin to succeed in a negative Rho environment, it does not mean all three must collapse, but their relative attractiveness compared to zero-yield investments must diminish.

This can happen in two ways: either interest rates plunge deeply into negative territory (making holding assets extremely costly, effectively “paying to save”), or these markets begin to collapse (making their cash flows unreliable).

Currently, neither is happening. Instead, we are in a system where:

AI is creating genuine productivity growth (benign deflation favorable to growth assets)

Real estate remains stable under manageable interest rates (controlled bad deflation)

Treasury yields are positive, and the Fed’s credibility remains strong (benign deflation benefits duration assets).

Bitcoin is caught in the middle, unable to compete with those assets that generate cash flows when the discount rate remains in the “golden zone” (not so low as to make zero yields irrelevant, nor so high as to threaten the system).

Why Kevin Woorch Matters

This raises the issue of monetary policy architecture. Appointing someone like Kevin Woorch, who has proposed “inflation is a choice,” to lead the Fed would mark a fundamental shift in policy paradigm—no longer following the “low rates for low rates” approach post-2008.

This is the message Woorch conveyed in summer 2025:

He represents a new Fed-Treasury agreement that recognizes the moral hazard of implementing quantitative easing while paying interest on reserves (IORB). Essentially, it’s a form of capital theft dressed as monetary policy: the Fed creates reserves, stores them at the Fed, and pays interest on them—funds that never enter the productive economy. This is a subsidy to the financial sector with no real economic benefit.

A Fed led by Woorch might emphasize:

Higher structural interest rates to prevent financial repression

Reducing intervention in the asset side of the balance sheet (less large-scale QE)

Strengthening coordination with the Treasury on debt management

Reevaluating the IORB mechanism and its fiscal costs

This sounds terrible for negative Rho Bitcoin: moderate interest rates, reduced liquidity, and a more orthodox monetary policy. And it might indeed be the case (though I suspect the neutral rate is still below current rates, and Woorch would agree—expect rate cuts, but perhaps not close to zero).

But it’s extremely bullish for positive Rho Bitcoin because it accelerates the liquidation process. If you believe debt growth is unsustainable, if you think fiscal dominance will ultimately override monetary orthodoxy, and if you believe the risk-free rate will eventually be proven fictitious, then you want Woorch. You want the facade to be torn down. You want markets to face reality rather than prolonging the status quo for another decade. You want risk pricing driven by industrial policy rather than monetary policy.

Positive Rho Scenario

Bitcoin’s positive Rho indicates the foundational assumptions of the financial system are being shattered—not a gradual decline, but a complete collapse. This means:

The risk-free rate becomes unreliable. This could be due to sovereign debt crises, conflicts between the Fed and Treasury, or a split in reserve currencies. When all asset pricing benchmarks lose credibility, traditional valuation models break down.

Duration assets will suffer catastrophic re-pricing. If discount rates surge or currencies devalue, long-term cash flows become nearly worthless. Over $100 trillion in duration-heavy assets (Treasuries, investment-grade bonds, dividend stocks) will experience the most severe re-pricing since the 1970s.

Ironically, Bitcoin’s lack of cash flows becomes an advantage. It has no earnings expectations, no coupons to devalue, and no yield curve to anchor market expectations. Bitcoin does not need to re-price based on failed benchmarks because it was never priced against them. It only needs to maintain scarcity when everything else is proven excess or unreliable.

In this scenario, precious metals respond first to the crisis, while Bitcoin reflects the post-crisis landscape. The current commodity spot devaluation will converge with the future yield curve devaluation. Milton Friedman’s dichotomy—money supply expansion causing inflation and dominating asset pricing—will merge into a unified force.

Ideological Insight

Returning to our earlier framework: metal prices tell you that spot devaluation is happening; Bitcoin will tell you when the yield curve itself breaks.

All signs point to: the crazy K-shaped economy is leading us toward destruction, while socialism is rapidly rising—precisely because Bitcoin’s three major competitors threaten the welfare of the global middle class: housing affordability, income inequality driven by AI, and the asset-labor income gap. All three are near critical points, and once society rejects the failed social contract of financial and labor devaluation, a fundamental transformation is imminent.

This is where Fed ideology begins to play a role. A true understanding that monetary policy is not isolated but works hand-in-hand with the Treasury to shape national industrial capacity, capital formation, and global competitiveness would mean a Fed president who does not pursue low rates at all costs. This is the worldview before the Volcker era and the implementation of QE: interest rates are a strategic tool, not a sedative. Capital pricing should serve productive growth, not subsidize financial abstractions.

This stance destabilizes the “awkward middle ground,” because trillion-dollar issues become unavoidable: will the Fed restore financial repression, lowering rates near zero to sustain asset prices and fiscal solvency, reigniting negative Rho Bitcoin theories? Or will debt, geopolitics, and industrial realities force the Fed to confront the fictitious nature of the risk-free rate, ultimately leading to a positive Rho Bitcoin scenario?

This convergence signals a systemic shift: Rho becomes a leading indicator (while the dollar’s weakness becomes a lagging indicator), because deflation is explanatory.

When artificially created “perpetual” fails, when coordination replaces pretense, and all benchmarks for pricing are ultimately revealed as purely political rather than sustainable, Bitcoin’s true moment will arrive.

Honestly, I don’t know if we are truly at the bottom now, and of course, no one can really claim to know (though technical analysts will always try). But one thing I do know from history: bottoms almost always coincide with fundamental shifts in market mechanisms that fundamentally reshape investor behavior and expectations. Though hard to see at the time, it becomes obvious in hindsight. So if you tell me that, in retrospect, this signals the arrival of a new world order—an era led by the most innovative Fed Chair, reshaping the “central bank interdependence” social contract with weaponized fiscal policy—then I can’t think of a more poetic, inspiring, and satisfying omen that the final ascent is imminent.